October 14, 2005

October 14, 2005 | Commentary on Energy and Environment

Making Energy More Affordable, Less Volatile

From an energy standpoint, Hurricanes Katrina and Rita delivered the worst one-two punch America has ever experienced. But it did not have to be so bad.

The central and western Gulf of Mexico is home to 25 percent of the nation's domestic oil production, 20 percent of its natural gas and more than 40 percent of its oil-refining capacity. Even before hurricane season, all three were barely adequate to meet America's growing demand.

Then, Katrina and Rita came along, both of which shut down Gulf energy production almost entirely in the days before and after the hurricanes swept through. Both also caused enough longer-term damage that it will take months before things return to normal. Beyond the impact at the gas pump, higher natural-gas and home heating-oil costs could make this winter one of the most expensive ever.

But there is no reason America must depend so heavily for energy on just one part of the country. Texas and Louisiana are not, as many assume, the only states with rich oil and natural-gas deposits. Offshore energy can be found in Alaska, the Pacific, the eastern Gulf of Mexico and the Atlantic. In addition, there is considerable untapped onshore potential, including the estimated 10 billion barrels of oil accessible at a small portion of the Arctic National Wildlife Refuge (ANWR).

Cumulatively, these other areas could contribute more energy than those ravaged by Katrina and Rita. And of course, refineries could be built and/or expanded in a number of areas outside the hurricane-prone Gulf. Indeed, 18 states, including all of New England, have no refineries at all.

Boosting energy production would mean lower prices overall and less vulnerability should a disaster -- natural or manmade -- knock out any one particular region.

But laws must change for this to happen. Federal restrictions on exploration and drilling put most offshore and many onshore areas off-limits, and a host of costly regulations make it far more difficult to build new refineries or expand existing ones.

Fortunately, some in Congress are trying to change this. One proposed bill would open up ANWR and let any state that wants oil and/or natural-gas drilling off its coast to opt out of the federal restrictions. Other measures would help reduce some of the regulatory red tape and procedural delays that have hampered refinery expansions.

The unfortunate coincidence of two major natural disasters striking at the only location where America hasn't put handcuffs on domestic energy production should serve as a lesson. Only if Congress takes steps now to allow more domestic energy supplies across the country are we likely to enjoy more affordable, less volatile energy prices in the years ahead.

Ben Lieberman is Senior Policy Analyst in The Roe Institute at the Heritage Foundation.

About the Author

Ben Lieberman Senior Policy Analyst, Energy and Environment
Thomas A. Roe Institute for Economic Policy Studies

Related Issues: Energy and Environment

Distributed nationally on the Knight-Ridder Tribune wire